HMRC operate an informal concession that permits nursing agencies (or employment businesses that provide nurses, midwives, and other health professionals) to exempt the supply of nursing staff and nursing auxiliaries to specified organisations (subject to various conditions).
This is a useful concession and widely applied. However, the decision at the European Court (CJEU) in ‘go fair’ Zeitarbeit OHG v Finanzamt Hamburg-Altona, throws this concession into doubt.
Zeitarbeit, the taxpayer, had exempted the hiring out of care workers to establishments providing physical, mental & psychological care. However, the court decided that these supplies were subject to VAT. It was not relevant that the staff were care workers or were supplied to recognised care establishments, Zeitarbeit’s supply was one of staff and was therefore VATable. Zeitarbeit was not a body devoted to social well-being, therefore its supplies of care workers could not be exempt. Equally the court decided that exemption cannot be applied directly to the care workers themselves.
Affected agencies should start to review their position and consider the pricing impact of this concession being withdrawn. Some customers will be able to reclaim VAT charged on hired-in nurses etc, however many will not and should consider how they will address the additional VAT costs in future.